GMS Inc (GMS)

The analysis of GMS Inc's solvency ratios over the specified period indicates a consistent absence of long-term debt, as evidenced by the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio remaining at zero from April 30, 2021, through April 30, 2025. This suggests that the company has not utilized leverage through debt financing during these years, relying predominantly on equity or internal funds to finance its operations.

The financial leverage ratio, which measures the proportion of assets financed by shareholders' equity relative to debt, consistently exceeds 2.5 across all years examined. Specifically, the ratio starts at 3.02 in April 2021, gradually decreasing to 2.56 in April 2023, and then slightly increasing to 2.70 by April 2025. This indicates that the company maintains a high level of asset financing through equity, with a relatively modest or negligible use of debt.

Overall, GMS Inc exhibits a robust solvency profile characterized by zero leverage ratios, implying a low risk of solvency issues associated with indebtedness. The relatively stable and high financial leverage ratio further underscores the company's conservative approach to leveraging, relying heavily on equity capital. This positioning minimizes financial risk, enhances financial stability, and suggests that the company's long-term solvency is well-preserved within this period.

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Coverage ratios

The interest coverage ratio for GMS Inc over the specified period exhibits notable fluctuations, indicating variations in the company's ability to meet its interest obligations through operational earnings. As of April 30, 2021, the ratio was 3.56, suggesting that earnings before interest and taxes (EBIT) were approximately 3.56 times the interest expense, reflecting a modest buffer to cover interest payments. The ratio experienced a significant increase in the subsequent year, reaching 7.28 as of April 30, 2022, indicating improved earnings capacity and a more comfortable margin for interest obligations. This upward trend continued into April 30, 2023, with the ratio slightly rising to 7.80, further strengthening the company's interest coverage.

However, a decline is observed in the following year, with the ratio decreasing to 5.96 as of April 30, 2024, suggesting a reduction in earnings relative to interest expenses but still maintaining a satisfactory coverage level. Notably, by April 30, 2025, the interest coverage ratio drops to zero, implying that the company either faced a scenario where EBIT was insufficient to cover interest expenses or that interest obligations were effectively eliminated, possibly due to debt repayment, restructuring, or other financial adjustments. This sharp decline signifies a potential concern for creditors regarding the company's ability to service its interest commitments unless remedial measures are undertaken. Overall, the trend indicates initial strengthening of interest coverage followed by a significant deterioration, culminating in a potentially troubling financial position by April 2025.